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Daily Outlook – 5th JANUARY 2012

January 5, 2012

Currency Updates:

U.S. Dollar Trading (USD) was strong on the back of renewed risk aversion in the Euro area banking sector overnight. Stock markets still managed small gains as economic data supported with factory orders gaining 1.8% vs. 1.7% previously. In US stocks, DJIA +21 points closing at 12418, S&P +1 points closing at 1277 and NASDAQ -1 points closing at 2648. Looking ahead, ISM Services PMI forecast at 53 vs. 52 previously. Weekly Jobless Claims are forecast at 375k vs. 381k previously.

The Euro (EUR) Debt concerns resurfaced after reports that Spain was looking for loans form the EFSF to recapitalize its banks. Also adding to the heavy selling EURO was the Italian Bank Unicredit which has looked to raise funds at a 43% discount from its current share price sparking a 15% slump in the stock yesterday. Looking ahead, October Industrial Orders forecast at +2.4% vs. -6.4% m/m previously.

The Japanese Yen (JPY) USD/JPY moved in a 20 pip range unable to take advantage of the USD strength with heavy EUR/JPY selling keeping the major capped. Most other Yen crosses were only down a little bit as US stocks finished positive. PM Noda talked in Japan that it will be coordinating with the BOJ to fight deflation fears going forward.

The Sterling (GBP) fell in sympathy with the Euro but only a small amount and found support at 1.5600. EUR/GBP broke below 0.8300 in new cycle lows. Data was decent with UK Mortgage approvals at 53k and Construction PMI ticking up to 53.2 vs. 52.3 previously. Looking ahead, December PMI services forecast at 51.5 vs. 52.1 previously.

The Australian Dollar (AUD) the Aussie dipped towards 1.0300 but found support and closed at opening levels in a bullish resistance to the Eurozone risk off. EUR/AUD hit all-time lows under 1.2500 and is continuing to trend lower. The outlook is mixed with a major event in Europe potentially causing a sharp selloff back to the 1.0000 level. We continue to look to the stocks markets and US Non Farm Payrolls data on Friday. UPDATE Trade Balance at 1380mn vs. 1595mn previously.

Oil & Gold (XAU) support below $1600oz was solid overnight and we closed at new week highs above $1610. OIL/USD remained supported on dips and closed above the $103 for a second day.

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.2828

1.2860

1.2935

1.3119

1.3197

USD/JPY

76.00

76.58

76.65

77.74

78.98

GBP/USD

1.5337

1.5502

1.5610

1.5692

1.5728

AUD/USD

1.0196

1.0233

1.0330

1.0447

1.0567

XAU/USD

1522.00

1561

1612

1616

1641

OIL/USD

100.00

102.50

103.30

105.0

108.00

Euro – 1.2935

Initial support at 1.2860 (Jan 10 low) followed by 1.2828 (Sept 14 2010 low). Initial resistance is now located at 1.3119 (Dec 22 high) followed by 1.3055 (Dec 28 high)

Yen – 76.65

Initial support is located at 76.58 (Nov 18 low) followed by 76.00 (Big Figure). Initial resistance is now at 77.74 (Dec 30 high) followed by 78.98 (Nov 1 high).

Pound – 1.5610

Initial support at 1.5502 (Jan 3 low) followed by 1.5337 (Dec 19 low). Initial resistance is now at 1.5692 (Dec 28 high) followed by 1.5728 (Dec 22 high).

Australian Dollar – 1.0330

Initial support at 1.0233 (Jan 3 low) followed by the 1.0196 (Jan 2 low). Initial resistance is now at 1.0447 (Dec 8 low) followed by 1.0567 (Mar 3 high).

Gold – 1612

Initial support at 1544 (Dec 44 low) followed by 1500 (Big Figure). Initial resistance is now at 16316 (Dec 22 low) followed by 1641 (Dec 14 high).

Oil – 103.30

Initial support at 102.50 (Intraday Support) followed by 100.00 (Intraday Support). Initial resistance is now at 105.00 (Intraday resistance) followed by 108.00 (Intraday Resistance).

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